Excellence. NO EXCUSES!

Excerpt:

“CULTURE”

COMES

FIRST!

Tom Peters 29 May 2014

2

Culture Comes … FIRST

WSJ/0910.13: “What matters most to a company over

time? Strategy or culture?”

Dominic Barton,* MD, McKinsey & Co.: “Culture.”

Bill Walsh,* NFL Hall of Fame Coach: “Culture

precedes positive results. It

doesn’t get tacked on as an afterthought on the

way to the victory stand.”

Lou Gerstner,* former CEO, IBM: “If I could have chosen not

to tackle the IBM culture head-on, I probably

wouldn’t have. My bias coming in was toward

strategy, analysis and measurement. In comparison,

changing the attitude and behaviors of hundreds of

thousands of people is very, very hard. Yet I came to

see in my time at IBM that culture isn’t just one

aspect of the game—IT IS THE

GAME.”

*Note that all three of these CEOs are/were charter members of the Hard-ass

School of Management. This was a realization that emerged for each one

over time, but is stated here—UNEQUIVOCALLY.

3

“Yet I came to see in

my time at IBM that

culture isn’t just one

aspect of the game—

IT IS THE

GAME.”

4

Hard is soft!

Soft is hard!*

*People. Customers. Values. Corporate “culture.” Some—most?—call these “variables” “soft.” Instead they say

with a near sneer: “Show me the numbers and the plans!”

Surely there is room (and need!) for the numbers and a plan. But they are the real “soft stuff”—malleable and

manipulable. (As we saw/continue to see time and again during the 2007+ economic crisis.)

The truly “hard stuff” cannot be faked or exaggerated: The relationships with our customers and our own

people and our communities. The spirit and grit of the enterprise. Integrity. A willingness to laugh at good tries

that go awry—the heart of innovation success. And so on.

“Hard” is soft. “Soft” is hard.

In Search of EXCELLENCE … in just SIX words!

5

Limits to the value of “management-by-body-count” in Vietnam:

“To his dying day,

[Robert S. McNamara] puzzled over

facts and figures

being no match for

hearts and minds.”*

*Any discussion would detract from the extraordinary power of this quote.

Source: Boston Globe review of a Donald Rumsfeld documentary/04/04.14

6

Culture With a … 100X BANG

“I am … hundreds

of times … better here

[than in my prior hospital

assignment] because of the support

system. It’s like you are working in

an organism; you are not a single

cell when you are out there

practicing.”—Dr. Nina Schwenk, Mayo Clinic*

*One of the two core values instilled by Dr. William Mayo (Mayo Clinic) in

1910 was, effectively, practicing team medicine. Designing the practice

around the patient, or “patient-centered care,” as some call its rare manifestation

today, was the other core value. At Mayo, upon occasion prominent M.D.s have

been asked to leave because of their inability to fully grasp the team-practice

concept.

7

Culture … UNVARNISHED There is a ton of high falutin’ stuff written about “corporate culture”—hey, I’ve

written some of it. But the unvarnished flavors appeal most to me. Former Burger

King CEO Barry Gibbons is a pal. He orchestrated a magical turnaround at a

troubled firm at a tough time. And the heart of the matter, which he largely

achieved, is described—UNVARNISHED—here:

“I didn’t have a ‘mission statement’

at Burger King. I had a dream. Very

simple. It was something like,

‘Burger King is

250,000 people, every

one of whom gives a

shit.’ Every one. Accounting.

Systems. Not just the drive-through.

Everyone is ‘in the brand.’ That’s

what we’re talking about, nothing

less.”

8

Culture … Give-A-Shit-ism

Forget “culture”/“vision”/“stories”/“narratives.” Skip the pseudo-technical

language. Don’t call the consultants or “coaches.” Inspired by ex-BK chief Barry

Gibbons, how about …

Plain-Vanilla-Insanely-Important-Self-

Managed-Give-A-Shit-ism? Give-A-Shit

… about each other, about the work,

about the community.

Give-A-Shit-ism Attribute #1: A desperate need

(desperate, not urgent; need, not

desire) to help others grow.

Mike Brown: “Commit to your people’s growth or don’t come at all.”

Respect is by far the most powerful

motivator of them all.

Philip Hopewell on respect: “Lean forward and

listen.”

TP: That “simple” tweet must be read carefully to have the impact it deserves.

More, subtle but not subtle, adapted from a tweet by Trevor Gay: It’s “Thank

you” for the ordinary, not the extraordinary, that matters

most. That’s the true sign of your awareness!

9

Culture … ADDENDUM

Systems Have Their Place:

SECOND Place

Tom Peters

01 March 2014

10

“If I could have chosen not to tackle

the IBM culture head-on, I probably

wouldn’t have. My bias coming in

was toward strategy, analysis and

measurement. In comparison,

changing the attitude and behaviors

of hundreds of thousands of people

is very, very hard. [Yet] I came to

see in my time at IBM that culture

isn’t just one aspect of the game—it

is the game.”

—Lou Gerstner, former chairman, IBM

11

Foreword

There is no doubt whatsoever about the importance of

systems—even in a one-person business. For most of us,

the “to do” list—a system if ever there were one—is an

imperative aid to making it through the day. On the other

hand, there is an other hand. That “to do” list is utterly

worthless without the will and discipline to follow up with

execution—i.e., actually doing the “to dos.” And if that

execution and doing involves others’ help, as it usually

does, then our attitude will differentiate between success

and failure.

Fact is, we could get by without the system—the “to do”

list per se. But we could not get by or get anything done

without the “culture”—the discipline to follow up and

attitude required to effectively work with others.

Hence, the title of this paper: “Systems Have Their Place:

SECOND Place.” Herein are 10 cases—from the U.S.

Air Force to Mayo Clinic to Toyota—in which systems,

though of the utmost importance, were toothless without

the “right” “organizational culture” to abet and sustain

performance excellence.

12

Systems Have Their Place: SECOND Place

“With ISO 9000 [quality standards] you can still have terrible products.

You can certify a manufacturer that makes life jackets from concrete,

as long as those jackets are made according to the documented

procedures and the company provides next of kin with instructions on how

to complain about defects. That’s absurd.”—Richard Buetow, Motorola

“If I could have chosen not to tackle the IBM culture head-on,

I probably wouldn’t have. My bias coming in was toward strategy,

analysis and measurement. In comparison, changing the attitude

and behaviors of hundreds of thousands of people is very, very hard.

[Yet] I came to see in my time at IBM that culture isn’t just one aspect

of the game—it is the game.”—Lou Gerstner, former chairman, IBM

The research that eventually resulted in the publication of In Search of Excellence

began in 1977. The story is rather long, but the bottom line is that American

business was under frontal, and successful, assault, mainly from quality-obsessed

Japanese enterprise. The problem, in my and my colleagues’ view, was largely one

of misdirected priorities—namely, American managers’ overwhelming emphasis on

business strategy and “the numbers first and foremost”—at the expense of people

and quality and execution. Eventually, my partner Bob Waterman and I locked

onto a group of American companies (subsequently labeled “the excellent

companies”) that were mostly “doing it right,” also in the face of stiff competition,

and had never lost their focus on what we labeled “the basics.” Our shorthand for

the research results was captured in six words: “Hard is soft. Soft is hard.”

Hard is soft: The typical base of “modern management” is mechanical—

emphasizing numbers and systems. Yet there is nothing easier than fudging the

numbers (look at the likes of Enron and Lehman Brothers); and, alas, most systems

quickly become hothouses for exponentially increasing and inevitably debilitating

bureaucracy. That is, these “hard” ideas, the bread and butter of MBA programs

and consultancies, are anything but “hard,” inviolable truths. Both numbers and

systems are, to be sure, unquestionably imperative for running the small business as

well as the giant—but they are not the bedrock.

Note: This paper indirectly stems from the current American presidential primaries. Two candidates suggested

that the Department of Defense’s wasteful ways could be curbed by ordering the adoption of “6-sigma

management.” Having put in two years of Pentagon duty as a naval officer (1969–1970), I was struck by the

hilarity of such a notion; I’d observed the “adoption” of miracle systems before in the DOD (PPBS/Program

Planning and Budgeting System, the brainchild of Robert McNamara), and watched their inevitable

byproducts—more bureaucracy and more waste. Moreover, ideas like this, and the issues associated therewith,

are near the heart of my last 35 years of professional work. Hence, with some outside urging, and with no

political axe to grind on this score, I prepared this brief paper.

13

“With ISO 9000 [quality

standards] you can still

have terrible products. You

can certify a manufacturer

that makes life jackets

from concrete, as long as

those jackets are made

according to the documented

procedures and the company

provides next of kin with

instructions on how to

complain about defects.

That’s absurd.”—Richard Buetow, Motorola

14

Soft is hard: We did discover bedrock. It came in the form of deep-seated respect for

the work force; managers who were out of their offices and engaged where the work

was done (“MBWA,” or Managing By Wandering Around, as Hewlett-Packard

called it); an abiding emphasis on trying it (whatever “it”!) rather than talking it to

death and then accepting the failures that accompany “a bias for action” as we

labeled this phenomenon; keeping constantly and intimately in touch with

customers; and “managing” via a small set of inviolable core values. These “soft”

ideas, largely AWOL on the American management scene circa 1980, were in fact

the “hard” infrastructure of excellence.

Paralleling our work, the quality “movement” took off, and enough “quality gurus”

sprouted to fill a sizeable sports stadium. Without a shadow of doubt, the newfound

emphasis on quality produced a raft of scintillating success stories—some of which

produced extraordinary growth in profitability and market share. Yet a closer look

reveals that for every quality program success there were scores of misfires—

programs, often absorbing vast amounts of time and sums of money, that produced

little or nothing in the way of better quality or improved financial results, and in

some situations made a slumping organization even more sluggish.

Though it’s foolhardy to make such an assertion, in my view there was a singular

reason for the mixed bag of results; and it was predictable from our excellence

research—too much reliance on the apparently “hard” procedures of, say, six-sigma

programs and not enough attention to those underlying, apparently “soft” attributes

such as the respect for and engagement of the workforce and a personal

commitment to excellence.

To support my point, I’ll offer up ten case studies (more accurately, snapshots) of

quality programs, often in incredibly resistant environments, that did produce

remarkable results. It turns out that they have two principal elements in common:

* Passionate local leadership.

* A bedrock corporate culture that supports (or comes to support) an ethos of

superior, quality work, courtesy of an engaged and respected and appreciated

workforce—and, indeed, an unwavering moment-to-moment commitment to no less

than excellence.

(There is an eleventh case study, which focuses on failure—that is, the at least short-

term demolition of a culture of quality that had previously consistently produced

earth-shattering results.)

15

Herewith the cases:

Case #1/United States Air Force Tactical Air

Command/GEN Bill Creech/“Drive bys”

Case #2/Milliken & Company/CEO Roger

Milliken/the 45-minute grilling

Case #3/Johns Hopkins/Dr. Peter Pronovost/The

roots of checklist power

Case #4/Commerce Bank/CEO Vernon Hill/The

RED button commitment

Case #5/Veterans Administration/Abrogating the

“culture of hiding”

Case #6/Mayo Clinic/Dr. William Mayo/

Teamwork makes me “100 times better”

Case #7/IBM/CEO Lou Gerstner flummoxed by

ingrained beliefs

Case #8/Germany’s Mittelstand/excellence-in-the-

genes

Case #9/Department of Defense/DASD Bob

Stone/tracking down the extant “Model

Installation” superstars

Case #10/Matthew Kelly/Housekeepers’ dreams

Case #11/Toyota/Growth or bust

16

Peters & Waterman 1977-present:

“Hard” is soft!

“Soft” is hard!

Source: In Search of Excellence: Lessons from America’s Best-run Companies/October 1982 (NB:

Research reported at forbes.com demonstrated that the companies in this book outperformed the

stock market, 1982–2002, by a wide margin.)

17

Case #1/United States Air Force Tactical Air Command

You’ve doubtless seen or heard of “flyovers”—the U.S. Air Force Thunderbirds or

the Navy’s Blue Angels honoring some significant event with their spectacular

aerobatics. But how about the “Drive by”?

General Bill Creech was the 4-star general who commanded the USAF’s Tactical

Air Command. He was a nut about improving the quality of everything—and wildly

successful at doing just that. (He increased battle-readiness dramatically—and in

the process also saved a bushel of money.) Sure, there were new systems and

procedures. But they were, in fact, the least of it. For example, Creech figured that

the key to quality was not the already super-motivated high-visibility USAF pilots,

but, rather, the supporting cast of thousands upon thousands who stood behind

them such as the brilliantly trained mechanics and technicians and logisticians. Like

most supporting casts, these folks were effectively invisible, defining “un-sung” in its

literal meaning. Creech moved heaven and earth to change all that. Among other

things, at TAC’s Langley VA headquarters, he had regular “Drive bys.” The

mechanics and others would polish their gear and spit shine their shoes and vehicles

and, with families and friends and the brass in attendance, hold a celebratory event

in which the supporting staff and equipment would parade “full dress” around the

base grounds. There were a hundred things like this, quintessential “soft stuff” that

added up to a matchless, “all hands” enthusiasm for and commitment to quality

work—with no less than staggering results. Moreover, Creech painstakingly

developed a cadre of acolytes, generals who subsequently infused this ethos into

other commands.

While the new systems that supported the

quality program were imperative, it was the

new “culture” of all-hands engagement,

quality-or-bust as the only acceptable

outcome, and General Creech’s passionate,

dogged personal engagement that made the

difference.

18

(NB/Small world: Oddly enough, as I was writing this I ran into, on a hike in New

Zealand, a retired USAF pilot. Unbidden, he got to talking about the F-16 rides he’d

given to low-ranking airmen who’d performed their supporting work notably well.

“I really took those rides seriously, Tom, as seriously as a combat-training sortie,” he

said. “We were really trying to honor the amazing work these guys were doing that

kept us flying.” At the time of his comment, he had no idea that I’d ever heard of

General Creech or, for that matter, TAC!)

(NB: In this paper, I chose to use interchangeably the likes of “Six-Sigma,”

TQM/“Total Quality Management,” “Deming Principles,” Crosby’s “Do It Right

the First Time,” and General Creech’s own “Six Pillars.” As a result, many readers

will doubtless scream bloody murder. But my point is simple: Coherent approaches

are vitally important! But it really doesn’t matter much which one, among the tested

ones, you choose—as long as the culture is “right” and the passionate-determined

leadership is in place.)

Case #2/Milliken & Company

I met Bill Creech and Roger Milliken at about the same time, in the mid-80s. Roger

ran Milliken & Co., the textile giant performing brilliantly against all odds in an

industry under crippling assault. In dedicating my 1987 book Thriving on Chaos to

him, I labeled Milliken & Co.’s commitment to quality the best I’d ever seen. There

was indeed a “quality guru” (Phil Crosby as I recall) and new systems had been

installed, damn good ones. But make no mistake, the “culture of quality” and war

on de-motivating bureaucratic roadblocks that Roger Milliken installed and

oversaw with unrelenting (the word was invented to describe Roger) determination

made all the difference.

Consider one small, but typical example. When, say, a plant manager from afar

arrived at the airport nearest to corporate headquarters, he would invariably be

met by “Mr. Milliken,” as the boss was called by all except his brothers, and a 45-

minute ride would ensue—just the two of them and the driver. The plant manager

knew what was coming—a non-stop grilling by Mr. M. on one and only one topic,

progress since the last grilling on the quality program and environment thereof. It

was a good idea in terms of your future welfare to have something—45 minutes of

significant somethings!—to say on the way to Spartanburg, SC.

19

And now consider one big example. Milliken was very formal (“Mr. M) and rank-

conscious to a fault. Yet when Roger decided to create the role of company

president, he passed over all the long-in-line and faithfully serving top candidates

and selected Tom Malone for the highly visible new slot. Malone had run a small

unit—but had become ardent cheerleader-in-chief for the most successful

implementation of the quality strategy and ethos in the multi-billion-dollar

company. The signal Tom’s “deep dip” promotion sent? Very loud and very clear:

Get aboard the quality culture train … or else.

Quality guru? Yes, Milliken had one.

Supporting systems? Yes, good ones! But

the defining difference was sustained and

unwavering leadership from the top and

the development of a quality culture in the

face of the industry’s abiding “culture,”

which was, in effect, exclusively focused on

competing through cost cutting.

20

Case #3/Johns Hopkins

Patient safety is a hot topic, as it well should be—depending on how you add up the

stats, American hospitals alone kill 100K to perhaps even 500K of us per year via

largely unforced errors. Near the head of the parade of crusaders for change is

Johns Hopkins’ Dr. Peter Pronovost, appropriately called the father of the widely

touted use of “checklists” in hospitals—and said by one high and mighty source to

have saved more lives than any other doctor in America over the last decade! Used

appropriately, and they very slowly but somewhat surely are coming to be,

checklists can result in mind-boggling reductions in errors—e.g., 80% or 90% or

even more in places of consequence.

The key phrase, however, is “used appropriately.” In his book (with Eric Vohr) Safe

Patients, Smart Hospitals, Dr. Pronovost takes us through the trials and enormous

tribulations of “getting checklists right”—i.e., unleashing the full potential of this

“obvious” and “simple” tool, initially at a renowned institution (Hopkins) where the

traditional medical hierarchy was deeply entrenched. The key, as is invariably the

case in such circumstances, was tackling and then, over time, dramatically altering

“institutional culture.” For one example among dozens, or hundreds, nurses must

be permitted—required!—to immediately intervene with docs who skip a checklist

step. Talk about 20-megaton “culture change” in an environment where all too

many (alas, most) M.D.s treat the likes of nurses with blatant disrespect (alas,

“blatant” is the appropriate adjective)!

Taking a somewhat closer look, we find that Peter Pronovost’s work was to a large

extent triggered by the unnecessary loss of a child, Josie King, at Johns Hopkins

Hospital. (The event triggered many things at Hopkins as well as elsewhere and is

chronicled in Josie’s Story: A Mother’s Inspiring Crusade to Make Medical Care Safe,

by the deceased child’s now-crusading mother, Sorrel King.) In his own book, Dr.

Pronovost discusses Josie’s care, or lack thereof, at a critical moment in the context

of a wrongheaded “corporate culture”:

“The nurses said they tried to voice their concerns up the chain

of command—but no action was taken. The way communication

was organized at Hopkins, as it is at most hospitals, did not make

this easy. Nurses would have to talk to residents, who then passed

the message on to chief residents or fellows, who would then talk

to the attending surgeons. It is common for the opinion of lower

levels of the hierarchy to be discounted and often ignored by

21

“When I was in medical

school, I spent hundreds of

hours looking into a

microscope—a skill I never

needed to know or ever use.

Yet I didn’t have a single

class that taught me

communication or teamwork

skills—something I need

every day I walk into the

hospital.”—Dr. Peter Pronovost

22

higher-ups. … If someone jumps rank or seeks approval from

another surgeon outside of the chain or in any way circumvents

this hierarchy, the penalty is often public humiliation and

reprimand.”

Wow—and, sadly, no surprise whatsoever.

Dr. Pronovost examined the roots of such death-dealing behavior, as reflected in his

own training regimen, “When I was in medical school, I spent hundreds of hours

looking into a microscope—a skill I never needed to know or ever use. Yet I didn’t

have a single class that taught me communication or teamwork skills—something I

need every day I walk into the hospital.” Indeed it is precisely the likes of a rare

“culture of teamwork,” or the characteristic absence thereof, that makes the

apparently straightforward implementation of the “simple” checklist rise or fall—

and accounts for the majority of those 100K+ unnecessary hospital deaths due to

preventable errors.

The importance of the “system,” that is, the

checklist per se, is irrefutable! Usefulness

of the checklist without culture change,

however, was/is marginal or zero or even a

step back. (That is, done wrong the

checklist becomes another mandated

bureaucratic annoyance—which may well

worsen rather than improve the already

lousy coordination among key actors such

as doctors and nurses.)

23

******************************

“The nurses said they tried to voice their

concerns up the chain of command—but no

action was taken. The way communication was

organized at Hopkins, as it is at most hospitals,

did not make this easy. Nurses would have to

talk to residents, who then passed the message

on to chief residents or fellows, who would then

talk to the attending surgeons. It is common for

the opinion of lower levels of the hierarchy to be

discounted and often ignored by higher-ups. …

If someone jumps rank or

seeks approval from another

surgeon outside of the chain

or in any way circumvents

this hierarchy, the penalty is

often public humiliation and

reprimand.”

******************************

24

Case #4/Commerce Bank

Commerce Bank (now part of TD Bank) created a revolution of sorts in East Coast

consumer banking by creating an atmosphere that welcomed customers at a time

when most banks seemed to be going out of their way to alienate their retail

clientele. In this “case-lette” I’ll focus on one tiny part of one customer-friendly

system. Founder Vernon Hill (with Bob Andelman), in Fans! Not customers. How

Commerce Bank Created a Super-growth Business in a No-growth Industry, explains:

“Every computer at Commerce Bank has a special RED KEY on it that says, ‘Found something stupid that we are doing that interferes with our

ability to service the customer? Tell us about it, and if we agree, we will give you

$50.’”

It’s a “system,” sure, but it’s 95% a transparent

“culture-enhancement device”—the focus is on

attitude far more than process. That is, the message

is, “For God’s sake, we beg each and every one of

you to please help improve the quality of the

customer experience!”

Case #5/Veterans Administration

Surprising many, Veterans Administration hospitals again and again rank at the

top of every list on patient safety/quality of care evaluations. One key reason is the

success of the VA staff at developing an understanding of the nature and source of

medical errors. That sounds obvious, but as things are, the health care system in

general seems perversely designed to keep people (docs, etc.) from admitting and

thence analyzing errors. The VA’s Ken Kizer calls it a “culture of cover-up that

pervades healthcare.” It contrasts sharply with the airline industry. “When a plane

crashes,” says James Bagian, M.D. and former astronaut, now working with the VA,

“they ask, ‘What happened?’ In medicine they ask: ‘Whose fault was it?’” The

latter, of course, is a perfect device for insuring silence.

25

The VA frontally attacked this pervasive and deadly “culture of cover-up”—and

replaced it with a “culture” based on learning from errors. The new idea, as

brilliantly reported in Phillip Longman’s Best Care Anywhere: Why VA Healthcare

Is Better Than Yours, was “looking for solutions, not seeking to fix blame on

individuals except in the most egregious cases.” The good (incredible!) news was

that as the culture change around admitting errors/learning from errors was

established, and as the process came to be seen as trustworthy, there was a resulting

thirty-fold increase in the number of medical mistakes and adverse events

that got reported to the “Patient Safety Event Registry.” And the exponentially

greater understanding of the source and nature of errors led in turn to procedural

and cultural alterations that make the VA the shining example it has become.

Once more the story is indeed one of a spectacularly

useful “system” … enabled, however, courtesy

mind-boggling, “genetic”-level culture change

which in turn was enabled by a grassroots-led,

passionately pursued (for over a decade) revolution.

******************************

Success Key #1: Directly confronting and

excising the deeply entrenched “culture

of cover-up” that pervades medical

practice at all levels—and replacing it with a

“culture of learning.”

******************************

26

Case #6/Mayo Clinic

Dr. Pronovost may not have had any team training, but there are a few examples of

healthcare organizations that “got it right from the start.” One of the two core

values instilled by Dr. William Mayo (Mayo Clinic) in 1910 was, effectively,

practicing team medicine. (Designing the practice around the patient, or “patient-

centered care” as some call its rare manifestation today, was the other core value.)

The potency of Mayo’s team-based culture? Consider this from Dr. Nina Schwenk,

a Mayo newcomer: “I am hundreds of times better here [than in my prior hospital

assignment] because of the support system. It’s like you are working in an organism;

you are not a single cell when you are out there practicing.” (Yes, that’s not a

misprint: “hundreds of times better.”) Such a culture lends itself to the safer and

more effective practice of medicine, for which Mayo may have few if any worldwide

peers.

Again: To be sure there are numerous formal

systems at Mayo, but the healthful elixir that

matters is a peerless culture of cooperation—that

dates back to William Mayo’s inspired leadership a

century ago. (NB: The Mayo examples come from Leonard Berry and Kent Seltman’s superb

Management Lessons from Mayo Clinic. In fact, I cannot resist one more jaw-

dropping “cultural” commentary from Berry and Seltman. It typically boggles the

mind of healthcare professionals in my seminars, who are used to the strict

separation of disciplines and hierarchies of authority and power in their own

institutions. To wit: “A Mayo surgeon recalled an incident that occurred shortly after

he had joined the Mayo surgical staff. He was seeing patients in the Clinic one

afternoon when he received a call from one of the most experienced and renowned

surgeons on the Mayo Clinic staff. The senior surgeon stated over the phone that he

was in the operating room performing a complex procedure. He explained the findings

and asked his junior colleague whether or not what he, the senior was planning

seemed appropriate. The junior surgeon was dumbfounded that he would receive a call

like this. Nonetheless, a few minutes of discussion ensued, a decision was made, and

the senior surgeon proceeded with the operation. … A major consequence was that the

junior surgeon learned the importance of inter-operative consultation for the patient’s

benefit even among surgeons with many years of surgical experience.” Berry and

Seltman also report, another jaw-dropper, that a senior Mayo oversight team more

or less routinely disciplines, or even releases, doctors, regardless of technical

reputation, who repeatedly fail to practice team medicine.)

27

(NB: And one more, per my lights, blockbuster: The authors report that in the

course of a typical Mayo hiring interview, the candidate is asked to describe a

successful project she or he led. The interviewers make careful note of the frequency

with which the candidate uses “We” rather than “I” to

describe her or his team’s activities!)

******************************

I am … hundreds

of times … better here

[than in my prior hospital

assignment] because of the support

system. It’s like you are working in

an organism; you are not a single

cell when you are out there

practicing.”—Dr. Nina Schwenk, Mayo Clinic

******************************

28

Case #7/IBM

I first met Lou Gerstner when I was at McKinsey & Co. in the late ’70s. The phrase

“tough as nails” was invented for the likes of Lou. Only GE’s Jack Welch, among

CEOs I’ve met, including generals who ran their nation’s armed forces, is in the

same league. Gerstner was also the quintessential McKinsey proponent of “Gimme

the facts, period.” He was, in short, an analyst’s analyst—and a superb one at that.

My work on organization effectiveness was in its infancy, and though mandated by

the Firm’s managing director (de facto CEO), Gerstner thought it was, well, crap.

Too “soft” by an order of magnitude!

Time passed, I co-wrote a book about excellence with Bob Waterman (our motto,

recall, was “Hard is soft. Soft is hard.”), and Gerstner after a couple of very

successful stops-at-the-top, such as American Express, was called in as CEO to save

(or dismantle) a staggering IBM. His success was mindboggling, and like so many

CEOs in those days, he wrote about it after the fact; i.e., Who Says Elephants Can’t

Dance. No surprise, I was completely taken by a paragraph that appeared in the

introduction:

“If I could have chosen not to tackle the IBM culture head-on, I probably wouldn’t

have. My bias coming in was toward strategy, analysis and measurement. In

comparison, changing the attitude and behaviors of hundreds of thousands of people is

very, very hard. [Yet] I came to see in my time at IBM that culture isn’t just one aspect

of the game—it is the game.”

Gerstner extolling the utter inescapable necessity of whole sale culture

change? You could indeed have knocked me over with the proverbial

feather! Though not directly on the topic of quality, this is in many ways

the crowning example in this brief set. Did Gerstner forget about the

analytics during his decade-long sojourn at IBM? You gotta be kidding!

His love affair with the “hard facts” was never far from the surface. And

yet, he faced the hardest of all facts, namely that “soft” really is “hard.”

That without tackling the bedrock (hard, eh?) culture issues, a dramatic

shift in corporate performance, even survival, was not possible. Lou also

came to appreciate that to make such a change he absolutely needed

voluntary buy in, not merely a mandate from the top, “In the end,” he said

in his book, “management doesn’t change culture. Management invites

the workforce itself to change the culture.”

Lou Gerstner?

“Invite”?

29

“Yet I came to see in

my time at IBM that

culture isn’t just one

aspect of the game—

it is the game.”—Lou Gerstner

30

Case #8/Germany’s Mighty “Mittelstand”

Germany’s extraordinary economic performance, particularly as high-end

manufactured products exporter, is not by and large built on the backs of a few

giant institutions such as Siemens or Daimler Benz. Instead the acknowledged

bedrock is a stellar set of middle-sized firms—the so-called Mittelstand. I studied

them closely and even did a PBS television special featuring several Mittelstand

firms—it was more or less their first American “public” exposure.

The world of “management thinking,” at the time of my Mittelstand research, in

about 1990, was as always awash in buzzphrases—none more commonplace than

“empowerment.” Yet as I toured these wildly successful German firms, the spear-

carriers for the nation’s export excellence, I never once heard “empowerment” (in

English or its German equivalent) or “continuous improvement” or their ilk. Never

= Never. Over time I came to appreciate what I think is the key success factor—and

my work over the last 20 years has reinforced that notion. In a word (or words) …

respect/mutual appreciation. Superior quality is more or less instinctive in German

enterprise; and beneath that “instinctive,” it is a byproduct to a significant degree of

the ubiquity of the apprenticeship education and development process. That process

provides a common background and cultural appreciation of superior workmanship

among junior and senior workers and their junior and senior bosses—all the way to

the CEO. I observed any number of un-staged exchanges between the CEO-owner

(boss of a billion dollar firm) and a 19-year-old line employee that could only be

labeled as conversations among colleagues. (Most of us, to put it mildly, think of

Germans as rigid and hierarchical—I was taken aback, I’ll be the first to admit.)

That is, there is widespread respect for and appreciation of craftsmanship and

quality work and the initiative required to make it all work—and hence no need for

the big boss to call in pricey HR consultants and launch an “empowerment

initiative.” Could it be so simple? Of course not! On the other hand, the

commonality of my experience throughout visits to a half-dozen companies, ranging

from toymakers (Playmobil) to machine-tool manufacturers (Trumpf), I believe

strongly supports the argument presented here.

I am hardly saying that systems and measures

are not a big part of life in a Mittelstand firm.

I am suggesting that they play a supporting role

to an incredibly powerful and remarkably

widespread national culture of quality work and

31

self-managed employee on-the-job

performance, commitment, accountability, and

growth. “Empowerment” consultants need not

apply. (I’d also add that virtually all the workforce

is unionized—a stereotypical image of union

workers focused on “gettin’ the day behind them” is

distinctly the wrong image.)

Case #9/Department of Defense Model Installations

Bob Stone was the director of Vice President Al Gore’s mostly invisible and

surprisingly effective “re-inventing government” program. His approach at the

White House was developed a decade before. When I first met Bob, he was Deputy

Assistant Secretary of Defense for Installations, in effect responsible for the status

and development of all of our military facilities. He re-defined his DOD task as a

headlong effort to achieve nothing short of global excellence. His approach

fascinated me—he turned his back on “programs” and “systems,” though he is as

much a conservative “systems guy” as anyone I’ve met. In short, he knew from long

and frustrating experience that “clever” new systems and programs launched with

promises of “transformation” were invariably dead ends in government—that is,

their main “products” were increased bureaucracy and constant gaming.

Stone’s extraordinarily effective approach was built around a set of what he labeled

“Model Installations.” Given the size of the defense facilities establishment, he

figured that there were mavericks out there already doing it right, in fact very right,

despite a gazillion bureaucratic impediments; hence, rather than have “brilliant”

staff analysts invent “improvement programs,” he cited and publicly honored some

small number of stalwart bases as “Model Installations.” He “invited” (shades of

Gerstner at IBM) others to learn from the stars’ approaches—which had invariably

produced results that put their peers to shame. Stone succinctly captured the notion

this way: “Some people look for things that went wrong and try to fix them. I look

for things that went right, and try to build off them.” And build off them he did!

(Along the way, Stone did attend to the systems per se—and took gargantuan steps

to de-bureaucratize them. For example, the principal DOD facilities management

guidance document was reduced from 450 pages to eight pages! Stone told me he

had wanted to produce the 8-page version in a pocket-size format—however higher-

level DOD guidance, beyond his remit, would not permit official documents being

printed and distributed in such a revolutionary format. Ah …)

32

“Some people look

for things that went

wrong and try to fix

them. I look for

things that went

right, and try to build

off them.”—Bob Stone

33

Once more, I’m not, to put it mildly, describing an

environment short on systems and procedures and

measures—but I am describing a context in which

local leadership (the model-installation commanders)

and a carefully nurtured culture of mutual respect

and appreciation of excellence are the dominant

drivers of success.

Case #10/Housekeepers’ Dreams

The single staff person who has the most face-to-face interaction with the hotel guest

is the housekeeper you cross paths with in the corridor and who is responsible for

“the little things” in your room that are not in the least bit “little.” We guests all

know intellectually we’re sleeping in a room where a thousand others have slept or

expressed unattractive habits, but we don’t want to be reminded by the work of a

sloppy housekeeper. All that said, the housekeeper is typically the most lightly

regarded member of staff—hence, among other things, high turnover and anything

but a commitment to service and guest experience excellence. Maybe it’s the

residual engineer/MBA in me, but I shy away from books with titles like The Dream

Manager. But killing idle time in an airport will cause all sorts of odd behavior.

Which is to say I aimlessly picked up Matthew Kelly’s The Dream Manager in the

Atlanta airport—and was instantly hooked. Though written in parable form (I have

trouble with that, too), it is the story of a real and outstanding (growth, profits,

customer loyalty) cleaning services company—that is, a collection of thousands of de

facto housekeepers! (The company chose to remain anonymous—imagining it would

be seen by employees as exploitative; I was later thrilled to meet the CEO of the

very real firm.)

Kelly, or, rather, the company’s leaders, made an obvious assertion (after the fact—

I admit to being bowled over by the obvious time and again) that everyone—yes,

including housekeepers!—has dreams. That housekeeper from God knows where is

likely a single mom with two kids and three jobs who imagines another more

satisfying life if only, say, she could get a community college certificate in business

administration or hospitality. Though the CC certificate will not directly make her a

better cleaner, it will make her a more fulfilled person—which will indeed doubtless

make her a better housekeeper. (It does indeed work!) Given all this, then, the

manager’s first job becomes explicitly helping front-line folks achieve their

dreams—hence, a “dream manager.”

34

Kelly brilliantly describes the guiding corporate philosophy:

“An organization can only become the-best-version-of-

itself to the extent that the people who drive that

organization are striving to become better-versions-of-

themselves. The question, then, is: What is an employee’s

purpose? Most would say, ‘to help the company achieve

its purpose’—but they would be wrong. That is certainly

part of the employee’s role, but an employee’s primary

purpose is to become the-best-version-of-himself or

-herself. … When a company forgets that it exists to serve

customers, it quickly goes out of business. Our employees

are our first customers, and our most important

customers.”

Perhaps you’d say, as I did at first (yes, even me,

Mr. “Soft is hard”), that “dream manager” is a bit

over the top. Yet it works—and has produced bottom

line excellence and service excellence for years.

And once more, as I talked with Kelly and then the

company founder, I discovered that, of course, there

are procedure manuals and time-tested systems—

damn good ones, in fact. But it’s not those manuals

that have produced the exceptional results—it’s a

clutch of “mere” housekeepers pursuing their

dreams and becoming more effective and fulfilled

human beings.

35

“We all have

dreams.”—Matthew Kelly

“We are ladies and

gentlemen serving

ladies and

gentlemen.”

—from the Ritz-Carlton Credo

36

NB: The Ritz-Carlton hotels, under the inspired leadership of Horst Schulze, set a

standard for hotel service quality. The organization’s “credo”: “We are

ladies and gentlemen serving ladies and

gentlemen.” Sound mundane? Well, it’s not. Perhaps the large majority of

the front-line staff who almost singlehandedly shape the customer experience—

housekeepers redux—have been treated like anything but “ladies and gentlemen.” A

single word (“lady” or “gentleman”) does not excellence make—but it sure as hell

helps! As to the idea (I’d say profound idea) of employees as “customers,” the

remarkable Herb Kelleher, Southwest Airlines founder and longtime CEO, always

insisted that there was a single primary underpinning for his company’s excellence

in a brutally competitive environment: “You have to treat your employees like

customers.” Related favorites of mine: From health and beauty-salon chain founder

John DiJulius: “When I hire someone, that’s when I go to work for them.” And Arie

Weinsweig, founder of the world renowned food emporium Zingerman’s: “If you

want staff to give great service, give great service to staff.” (NB: At the Ritz-Carlton,

those housekeepers are permitted to spend $1,000+ to fix a guest problem—without

the approval of “management.” A lot of middle-managers are not allowed that

much leeway!)

Case #11/Toyota

Toyota’s systems have long been the envy of the world—ensuring quality matched

by none. Or so was the case for several decades. In the last few years, alas, Toyota

has become a poster child for quality problems, some of which are purported to

have resulted in fatalities. While it’s admittedly absurd to pin a problem of this

magnitude on a single variable, it seems almost certainly to be more or less the case

in this instance.

Closing in on a then-stumbling GM, Toyota pulled out all the stops in a rush to

become the world’s largest car company in terms of sales. While the objective was

achieved, it seems to have come at the expense of a proud culture of quality and

excellence, which was effectively replaced by a culture more along the lines of

“growth-at-all-costs.”

As a result of the ensuing quality missteps, which clearly dented customers’ faith in

the product, top leadership was revamped, apologies were made by the Toyoda

family, and new family leadership was installed at the top—the results, happily, are

promising.

37

When we speak of Japan’s enterprise success, particularly

in the quality and continuous improvement arena, we talk

often of systems—“CI”/continuous improvement or “lean

production” or the “Deming Principles.” Dr. Deming’s

approach did work miracles in Japan, but the lessons

extracted therefrom were misleading. Deming may have

had a scheme, but it was based almost entirely on

an enabling “corporate culture” of employee commitment

to quality; moreover, in Japan, the existing national

culture and approach to work were tailor-made for

implementing Deming’s prescriptions. Of course, as

suggested in this brief example from Toyota, even the

most effective of corporate cultures can be torpedoed, at

least in the short term.

The most effective cultures imaginable—e.g., Toyota’s—

can slip, slip badly, and slip astonishingly quickly.

Sustaining a culture of quality and excellence is a daily

affair. And a conscious daily affair! Leaders at all levels

must explicitly assess their daily performance to gauge the

degree to which they have stayed true (or not) to the

cultural imperatives of an organization devoted to

matchless quality and an invariant standard of

excellence.

38

Systems Have Their Place: SECOND Place

These eleven case studies capture the lion’s share of the organizational universe. E.g.:

the public as well as the private sector. Our fastest growing “industry,” healthcare, as

well as the poster child for embattled industries, textiles. Non-USA entities—Toyota

and the German Mittelstand—as well as American institutions. The life of USAF

pilots—and the life of hotel housekeepers. The stories are, obviously, intentionally

repetitive. They effectively make the same point again and again: Systems and

procedures are necessary but nowhere nearly sufficient. In fact, in the absence of fired

up local leadership and a supportive organizational culture that starts with respect for

the contribution of every employee, elaborate systems can readily become additional

bureaucratic drag.

To an extent, this discussion is pessimistic. There are no miracle cures. There are no

clever systems that will in and of themselves carry the day. If you don’t have an

effective culture taking the lead, you are pretty much doomed to marginal

improvement, or, God help you, steps back by merely installing a system, no matter how

ingenious or how highly touted it may be.

In the end: Hard is soft.

Soft is hard. The traditionally

viewed “soft” variables such as “institutional

culture” and “inspired leadership” are the principal

keys to success—or failure.

39

Closing notes:

(1) While I have consistently indicated to the contrary, one might assume that I am

giving systems short shrift. To be sure, I am emphasizing the incompleteness—and

often problematic nature—of a strategy that envisions superior systems as a be-all

and end-all. But, trained as I am, first and foremost, as an engineer, I am hardly

indisposed to superior systems—organizations do indeed have to be organized, and

systems are the scaffolding for effectively organized affairs. In fact, an approach to

doing business that brushed off systems and effectively stopped with a culture that

was, say, highly supportive of staff would also by and large be dysfunctional. In

short, one needs both superb systems and a culture that unmistakably “puts people

first” in pursuit of quality and overall excellence. The purpose of and impetus for

this paper is, then, primarily to act as a corrective to the traditional approach that,

so often, emphasizes systems and de-emphasizes—or ignores!—the sort of

organizational cultures described briefly in the cases above.

(2) A related point, a source of continued irritation to me: I am not talking about

“balance”—a word I dislike! That is, the cases above do not “balance” culture and

systems—they are, de facto, cases of, if you will, “double excellence.” The systems

at, say, TAC are superb—and the TAC culture instilled by General Creech is

appropriate to maximizing the value of those systems and, hence, producing overall

excellence and superior results.

Culture first, systems imperative-but-second …

for sustaining excellence in quality and

productivity and performance excellence.

You’ve gotta do both with panache!